Pokémon Red Version takes place in the fictional region of Kanto, which will be a separate region among others in future games. It is made up of geographical areas inhabited by Pokémon. However, the distribution area of each Pokémon is different for the 151 existing Pokémon species. The Kanto region is made up of humanly populated cities and the roads that connect them.

The silent protagonist of Rouge is a young boy who lives in Bourg Palette. After venturing alone into the tall grass of Pallet Town, a voice warns the player to stop. Professor Chen, a famous Pokémon researcher, explains to the player that Pokémon can live there and encountering them alone can be very dangerous. He takes the player to his laboratory where they meet the professor's grandson, another boy wishing to become a Pokémon master, who turns out to be a rival. The player and rival must then choose a “starting Pokémon” for their journeys. Then, the rival challenges the player to a Pokémon battle where their two starting Pokémon face off. The rival will continue to challenge the hero throughout the game, at several points in the game.

While visiting towns in the region, the player will encounter special establishments called "arenas". Inside, there are arena masters, whom the player must beat in a Pokémon battle to obtain a badge. Once all eight badges have been acquired, the player will be allowed entry into the Pokémon League, which consists of the best Pokémon trainers in the region. The hero will then have to beat the four members of the League then the champion, the player's rival.

Throughout the game, the player will have to fight the forces of Team Rocket, a criminal organization, which steals and abuses Pokémon. They imagine numerous plans to steal rare Pokémon, which the player must foil.